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The UK property market braces for Labour’s Autumn budget

In a few days’ time Labour Chancellor Rachel Reeves will deliver her first Autumn

Budget statement since the party came into power earlier this year, and experts

predict that the UK property market will be one of the sectors to see some big

changes.


According to property website Rightmove, buyer ‘jitters’ ahead of the budget have

slowed down a typical autumn bounce in house prices. The average asking price for

a UK home rose 0.3% month on month to £371,958 in October, a smaller increase

than expected at a time of year when the market typically picks up.


Below we break down which aspects of the market might be discussed.


Energy efficiency


As building standards in the UK change to include measures aimed at reducing its

carbon footprint, energy secretary Ed Miliband recently confirmed Labour’s plans to

tighten the rules, meaning that it is something for property investors to bear in mind

for any existing or future property investments. 


For landlords, investing in new-build property is one of the most popular and

potentially cost-effective ways of ensuring compliance with any upcoming energy

efficiency standard changes.


Falling inflation


Last week the Office for National Statistics revealed that inflation had fallen to 1.7%,

its lowest level in three years, and well below the government’s 2% target. This

means that property owners will likely benefit from an interest rate cut and a

subsequent mortgage rate cut.


According to Rightmove, the market is likely to be supported by lower mortgage

costs after the budget, and the average five-year fixed mortgage rate was 4.6% last

week, down from 6.11% at the peak in mid-2023.


Buyer confidence may also get a boost from interest rate cuts by the Bank of

England. Experts currently predict that the rate-setters are likely to reduce borrowing

costs for a second time next month, and that there is a chance of another drop in

December.


Capital gains tax


Labour has previously said that it won’t implement changes to this tax, which is

placed on the gain that arises when you sell an asset, but rumours have been

circulating in recent days that this could change.


Sir Keir Starmer has already ruled out charging capital gains on someone’s first

home, which is exempt under the current system, but did not extend that promise to

any rise.


An increase in the rate, or a cut in the current £3,000 threshold at which it becomes

due, would affect second homeowners, landlords, business owners, shareholders

and those selling valuable assets.


The Chancellor could either increase the main rate of capital gains tax, which is

typically either 10% or 20%, or expand the base of assets liable for the levy.


The housing shortage


To address the UK market’s growing need for homes, the Labour party has vowed to

build 1.5 million houses over the next five years, a rate of house building last seen in

the 1960s.


Labour has reinstated minimum housebuilding goals for the UK, but on a much more

targeted basis, in a bid to give a boost to the areas with the highest need, and this

could have the most positive impact on the North and the Midlands.


In recent years the strongest returns for landlords and property investors has been

found in the property markets of these regions, so a regeneration boost and

additional housing could see even greater gains in these locations. The budget is

likely to include more information related to this.


Stamp duty land tax


According to the Institute for Fiscal Studies (IFS), stamp duty ‘has a claim to be the

most economically damaging tax in the UK. It makes both housing and labour

markets less efficient, as a drag on growth.’


Currently any property sold for £250,000 or less is exempt, while the next £675,000

is subjected to a 5% levy, which reaches a peak of 12% for the most expensive

homes.


Stamp duty currently raises the sizeable sum of £13 billion a year and an increase

worth around £1.5 billion is already scheduled for April 2025, so it is unlikely that any

other changes will be announced in this week’s budget.


One likely announcement in the budget however is a 1% increase in the stamp duty

surcharge for overseas buyers. This would make buying UK properties pricier for

foreign investors but it could mean less competition in the market for UK buyers.


Tailor my Property


Consulting with an industry professional is vital to ensure you move in the right

direction for your personal financial and property goals, whether it be renting, buying

or selling property in the UK, particularly with the potential market changes arising

from the Autumn budget.


Tailor my Property’s expert network of property, finance and investment professionals

will be able to assist you with assessing the market and moving ahead with peace of

mind and clarity.


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